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Performance of trade and investment activities by firms across national boarders
International Business
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Ongoing economic integration and growing interdependency of countries worldwide
Globalization of markets
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Exchange of products and services across national boarders; typically through exporting and importing
International Trade
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Sale of products or services to customers located abroad, from a base in the home country or a third country.
- Boeing and Airbus export billions
- Exporting
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Procurement of products or services from suppliers located abroad for consumption in the home country or a third country
Importing or Global sourcing
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GDP= C+I+G+Net Exports
GDP= Consumption + Gross Product Investment + Government Expenditures + (Exports- Imports)
Sig X Model/Expenditure Model
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Transfer of assets to another country or the acquisition of assets in that country.
- Also known as 'foreign direct investment' (FDI), we will focus on this type of investment
- International Investment
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Passive ownership of foreign securities such as stocks and bonds in order to generate financial returns
- Stocks and Bonds
- International Portfolio Investment
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Is conducted across national boarders
- Uses distinctive business methods
- Is in contract with countries that differs in terms of culture, language, political system, legal system, economic situation, infrastructure, and other factors
- Qualities of International Business
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Four Risks of International Business
- Cross-Cultural Risk
- Country Risk
- Currency (financial) Risk
- Commercial Risk
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Cultural differences
- Negotiation patterns
- Decision-making styles
- Ethical practices
- Cross-Cultural Risk
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Harmful or unstable political system
- Laws and regulations unfavorable to foreign firms
- Inadequate or underdeveloped legal system
- Bureaucracy and red tape
- Corruption and other ethical blunders
- Government intervention, protectionism, and barriers to trade and investment
- Mismanagement or failure of the national economy
- Country Risk
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Currency exposure
- Asset valuation
- Foreign taxation
- Inflationary and transfer pricing
- Currency (financial) Risk
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Weak partner
- Operational problems
- Timing of entry
- Competitive intensity
- Poor execution of strategy
- Commercial Risk
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Major Participants in IB
- Multinational Enterprise (MNE)
- Small and Medium-sized enterprise (SME)
- Born global firm: a young entrepreneurial SME that undertakes substantial international business right from the start
- Non-governmental organizations: many of these non
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A large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries
Multinational Enterprise (MNE)
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Typically, companies with 500 or fewer employees, comprising over 90% of all firms in most countries.
- Increasingly engage in international business.
- Small and Medium-sized enterprise (SME)
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